You are here

The objective of this study is to identify the transaction cost factors and household characteristics that influence the decision of marketing channel choice by smallholder maize farmers in rural kebele of Bura Borama, district of Shashemene. The main hypothesis of the study is that farmers' choice of marketing channel is influenced by transaction costs (e.g. information, transport, negotiation and monitoring costs) and household characteristics (e.g. age, education). Households facing higher transaction costs are excluded from using certain marketing channels, even if these market outlets exist. A multinomial logit model is used for empirical estimation using data from a survey of 103 maize farmers of Bura Borama. Empirical findings of this study reveal that the most important factors that explain farmers' decision of marketing channel choice are farmers' age, years of education, farm size, access to transportation, access to information, time spent to accomplish a one time sales and a possible delay in payment during transaction. The result suggests that policy intervention of government and/or other concerned institutions should focus on reducing some of these transaction costs through the provision of institutional support to smallholder maize farmers. These supports could be in the form of improving access to market information, establishing producers' organization and improving the rural road networks which link production areas to markets